Friday 16 April 2010 05.57 EDT
First published on Friday 16 April 2010 05.57 EDT

ITV's share price has hit a 12-month high today after a bullish analysts' report from Goldman Sachs about the media sector upgraded its forecast for TV ad revenue growth to 10% year on year.

Goldman Sachs, which produced a 32-page report on the health of listed media stocks today, highlighted ITV, the newspaper publisher Trinity Mirror and Vincent Bolloré's French marketing and advertising group Havas as "top picks" in their sectors.

ITV's share price hit a 52-week high in early trading today following publication of the note. At 9.30am, ITV was at 69.2p, up 1.7% on last night's closing price.

The report said that UK TV advertising is recovering "more strongly" than anticipated, "with the most positive surprises from ITV".

The strength of the ad recovery coupled with positive structural, regulatory and competitive developments meant that it now expects ITV's revenues to be up 10% year on year, it added. Goldman Sachs had previously forecast that ITV's TV ad revenue to be up 7% year on year. The new forecast translates to 15% year-on-year growth in ITV's advertising revenues in the first half of 2009, boosted by the football World Cup in South Africa in June.

This will be followed by 5% year-on-year growth in the second half of 2009 as annual comparisons become tougher. In 2011 ITV's TV ad revenues are forecast to be up a further 6% year on year, the Goldman Sachs report said.

"The free [to air] TV companies may face some long-term structural threat from online, although we believe this will remain unclear for two to three years," the bank said. "In the meantime, some companies, particularly ITV, should see benefits from the end of multichannel fragmentation, competitor issues and regulatory changes."

"Special factors that may have somewhat boosted advertising in first half include the UK election and the World Cup," said Goldman Sachs. "However, we believe that the market is being driven primarily by supermarkets and FMCGs (fast-moving consumer goods companies), followed by a return of automotive and financial [sector] spend (particularly in 2Q) and that there has been a limited boost from government spending in March."

The report said that ITV should be "2%-3% ahead of the total TV ad market this year, owing to its stronger audience performance versus Channel 4 and [Channel] Five, as well as its rights to the World Cup".

In the marketing and advertising sector the report said that Havas "remains our top pick... owing to its strong underlying turnaround".

Goldman Sachs was impressed with an average, across the listed marketing and advertising groups it monitors, of 20% of sales coming from high-growth emerging markets, fuelling a positive outlook for recovery.

"Havas has shown the strongest new business performance over the last year, at 4% of revenue, underpinning its long-term turnaround and adding scope for greater margin improvement, in our view," said the report. "The other European companies have also shown solid new business performance [such as WPP and Publicis], while the US companies' performances [such as Omnicom] have been more mixed."

The report is also positive on Trinity Mirror, publisher of the Daily Mirror and an extensive regional newspaper operation, because the "ad recovery and cost savings will drive a strong near-term earnings recovery that is not reflected in either consensus or the low market valuation".

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